Corporate Governance is passing through a testing time. The recent corporate scandals have brought the boards under the watchful eyes of regulatory authorities in different parts of the world. Regulatory authorities are enforcing new laws to reinforce investor confidence. The
interface between the Non-Executive Director (NED) and
the CEO is complex and sensitive. When I was a CEO,
I was apprehensive about the NED's possible interference,
and worse still, the NED's ignorance about the business
I was operationally responsible for. As an NED now,
I am apprehensive that the CEO would resist my inputs.
The plot is the same, the actors have changed roles.
Much literature has been published about this subject,
usually set in the wider context of corporate governance,
which is probably among the hottest topics for management
writers today.
Consider
the attributes of a successful CEO. Apart from being
knowledgeable, dynamic, intelligent, analytical, inspiring
and so on, he is likely to be a person with three distinct
qualities : A mind of his own, a touch of narcissism,
and an orientation to power. These three qualities are
what differentiated him from his peers earlier in his
career, and helped him to reach the CEO's position.
Proven competence, does not preclude such a person making
wrong judgments or decisions, but these three qualities
together create a blind spot which deters him from careful
listening to wiser counsel or alternate views. Like
Icarus, the very strength that raised him, can accelerate
his downfall. That is why, CEO tenures are getting shorter
each decade as the business environment gets more complex.
In
1995, William Smithburg, CEO of Quaker Oats, acquired
Snapple Beverages for US $1.7 bn. Two years later, Quaker
divested Snapple for US $140 mn and fired Smithburg.
Doug Ivester worked his way up in Coca-Cola over decades,
and after a short stint as CEO, lost the top job he
must have strived to get throughout his life. Gillette,
CEO, Mike Hawley spent 38 years before being appointed
CEO, a job he could keep only for one and a half years. |
